TLKM
Contact our analyst Eka
3rd December 2022
BUY
Price Rp 4040
Target price Rp5730
BUY
Price Rp 4040
Target price Rp5730
TLKM new strategies
- TLKM plans to merge Telkomsel and Indihome in early 2023. With this merger, there is potential for fixed cellular network convergence (fixed mobile convergence / FMC), and synergy between mobile and fixed networks.
- The FMC strategy would increase TLKM’s value by distinguishing TLKM’s unique competitive advantage in the market. Also, with FMC, TLKM is expecting greater efficiency in capex and data integration.
- TLKM also has another strategic initiative, InfraCo, which is a data center, cloud and B2B digital IT service Co.
- TLKM has already unlocked infrastructure value starting with Towers. With this new initiative, TLKM aims at further capex efficiency with improvements in coverage, service and asset utility.
- TLKM is also in the process of consolidating data center (DC) assets.
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Stable revenue
Valuation: Maintain BUY with TP 5,750
- TLKM booked stable revenue in 3Q2022, with Indihome and Telkomsel continuing to be the engines of growth. TLKM revenue reached IDR 36.89 trillion up +0.3% YoY. For 9M2022 TLKM maintained single digit growth of +2.7% YoY to IDR 108.87 trillion.
- IndiHome recorded +4.4% YoY growth to IDR 7.05 trillion in 3Q2022 or +6.4% growth in 9M2022 to reach IDR 20.88 trillion. The growth is inline with the increase in IndiHome new subscribers and a stable ARPU. Indihome’s total subscribers are now 9 million from 8,6 million last year.
- Data, Internet & IT service revenue increased +6.1% YoY to IDR 60.47 trillion in 9M2022 and +7.9% YoY in 3Q2022 boosted by higher cellular data internet revenue +6.2% YoY in the 9M2022.
- We are targeting TLKM revenues to reach IDR 150.3 trillion this year as we expect demand will continue to grow.
- TLKM booked a lower bottom line profit, -54.5% QoQ to IDR 3.27 trillion with a lower NPM of 8.9% due to an unrealized loss from the change in fair value of the investment in GOTO of IDR 3.38 trillion from a gain in 3Q2021 of IDR 53 billion. For 9M2022, TLKM net income reached IDR 16.58 trillion, a decrease of -12.1% YoY.
- After the eight-month lock up period for pre-IPO investors, GOTO’s share price is expected to fall further due to fears of a sell-off, and it will likely be a negative factor for TLKM 2022’s performance.
Valuation: Maintain BUY with TP 5,750
- With more expansion strategies and efficiencies , we are targeting TLKM to reach IDR 5,750, 42% upside, which is a 21x PE valuation within one year. We maintain our recommendation to BUY.
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